A Conspiracy of Counterfeiters

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

“Lenin was certainly right,” John Maynard Keynes continued in his 1919 classic, “The Economic Consequences of the Peace.”

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Keynes warned that terrible hatreds would be unleashed against “profiteers” who enriched themselves through inflation as the middle class was wiped out. And he pointed with alarm to Germany, where the mark had lost most of its international value.

By November 1923, the German currency was worthless, hauled about in wheelbarrows to buy groceries. The middle class had been destroyed. German housewives were prostituting themselves to feed their families. That same month, Adolf Hitler attempted his Munich Beer Hall Putsch.

Today a coterie of economists is prodding Federal Reserve Chairman Ben Bernanke to induce inflation into the American economy.

Fearing falling prices, professor Kenneth Rogoff, former chief economist for the International Monetary Fund, is pushing for an inflation rate of 5 to 6 percent while conceding that his proposal is rife with peril and “we could end up with 200 percent inflation.”

Paul Krugman, Nobel Prize winner and columnist for The New York Times, is pushing Bernanke in the same direction.

Bernanke, writes Krugman, should take the advice he gave Japan in 2000, when he urged the Bank of Japan to stimulate the economy with “an announcement that the bank was seeking moderate inflation, ‘setting a target in the 3-4 percent range for inflation, to be maintained for a number of years.'”

And who inspired Bernanke to urge Tokyo to inflate? Krugman modestly credits himself.

“Was Mr. Bernanke on the right track? I think so — as well I should, since his paper was partly based on my own earlier work.”

But Krugman is not optimistic about Bernanke’s injecting the U.S. economy with a sufficient dose of inflation.

Why is Ben hesitant? Two words, says Krugman: “Rick Perry.”

Krugman believes Bernanke has been intimidated by Perry’s populist threat in Iowa after his first day of campaigning:

“If this guy (Bernanke) prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous.”

Perry was indulging in Texas hyperbole, and the press came down hard on him for language unbefitting a presidential candidate.

Yet Perry has raised a legitimate series of questions.

What should be done to high officials of the U.S. government who consciously set out to dilute and destroy the savings and income of working Americans? What should be done to those who have sworn an oath to defend the Constitution and then steal the wealth of citizens by secretly manipulating the value of the currency, the store of wealth upon which those people depend?

Is inducing inflation — debauching the currency, the systematic and secret theft of the savings of citizens — a legitimate policy option for the Federal Reserve? Has Congress authorized official thievery?

Who do these economists think they are?

Inflation rewards debt — and erodes savings. It is legalized counterfeiting, the deliberate creation of money with nothing to back it up.

If a citizen printed dollars bills, he would be tracked by the Secret Service, prosecuted and imprisoned. Why, then, is the Fed’s clandestine printing of money with nothing to back it up a legitimate exercise and, according to Krugman & Co., a desirable policy for Bernanke and the Fed?

Schooled economists such as Rogoff, Krugman and Bernanke know how to shelter their wealth from the ravages of inflation — and even to get rich. But what about widows whose husbands leave a nest egg of savings in cash and bonds? What are they supposed to do as the value of their savings is wiped out at 4, 5 or 6 percent a year — or whatever annual rate of ruin the Rogoffs and the Krugmans decide upon?

This is not only an economic issue but a moral issue.

To inflate a currency is to steal the money citizens have earned and saved and entrusted their government to protect. Any government that betrays that trust and steals that wealth is not only unworthy of support. It is worthy of being overthrown.

On this one, as Keynes said, Lenin was right.

Perry and Ron Paul deserve the nation’s gratitude for putting this issue of the unfettered power and the amorality of our unelected Federal Reserve on the political docket.

I give respect and gratitude to Ron Paul, but as for Rick Perry I don’t turst the man. It sounds to me like Perry was playing cowboy for his Texas audience and singing them a tune they like to hear. Do I believe that Perry would do anything to change the way the Fed does business?…Not just no, but hell no. He’s another corporate puppet just like Obama, George W. and Bill Clinton for that matter. There’s only one Texas politician I trust 150% for a truly Constitutional stance on things (that doesn’t mean I always agree with him but I respect his integrity) and that’s Ron Paul. As for Perry he’s trying to steal Ron Paul’s thunder on the Fed and the deficits and Bachmann’s thunder with evangelicals as you can see with Perry’s prayer meeting.

Dimitry is right. Perry is just George W. Bush on steroids. While he bemoans the dilution of the nation’s currency, he encourages the dilution of its workforce (and wages) through his open-borders policies. For that reason alone, he will have difficulty carrying the conservative base of the Republican Party (people who still believe in the rule of law) no matter how many prayer meetings he has. The last thing this nation needs is another corporatist Elmer Gantry. The last one was bad enough.

“German housewives were prostituting themselves to feed their families.”

– From where did you get it Mr. Buchanan ? I understand that the situation in the Weimer Republic in the depression era was really dire but women from a supposedly proud race becoming prostitutes to feed their family ? I would love to see your evidence on that Mr. Buchanan.

Another interesting question for Mr. Buchanan. What if because of supposedly government-induced infaltion and taxation measures the people in one or two vital states like Arizona and Texas to vote populists who might seek secession from Union ?

Fiat currency like our paper money is not a source of wealth in its own right but only represents an underlying wealth. The question then is,”what constitutes wealth?”

I equate wealth to the value that human beings place on things, both material and non-material and are willing to expend time and energy (work) to obtain. I like hamburgers but I’m not willing to work for a month to earn enough to buy one. On the other hand, I might be willing to work for a month to buy a big high-def flat screen TV or work a couple of years to buy a new car.

The nation that makes things that people value and/or produces natural resources that people value is a nation that is producing wealth. Take away a nation’s ability to produce things and you’ve diminished its wealth. This is happening now in the USA.

Japan and China make things. They are producing an underlying wealth that is not reflected in the value of their currency, which is deliberately kept low by government policy.

Bernanke’s policy of inflating our currency over and above the loss of wealth that the USA has suffered is designed to circumvent the currency manipulation by Japan and China and thereby increase the price of imports leading people to buy USA made products. But this won’t work because we don’t make a lot of things anymore and people who work and save will suffer the consequences.

While inflation is bad – terrible in fact, stagnant close minded economic thought repeated by rote is worse.
The same people who have engaged in a class war, bordering on genocide, on the working and middle class resulting in falling real wages for the last three decades are concerned about the working and middle class savings being diluted.
This ignores the disastrous economic policies, which this Web site to its credit often details, that have led the working and middle not to have savings but higher credit limits. There is a reason the national saving rate from the 1970s crashed from the low teens to negative or close to zero since then.
Instead of bailing out the incompetent rich and powerful in 2008, if we had used monetary instead of fiscal policy to enforce accountability the country would be on the road to a real recovery instead of a slow repeat of the fall of the Spanish and Ottoman empires.
The financial services industry should have had to come clean that for the last 30 years, since deregulation, it has been engaged in criminal fraud and not living up to its fiduciary duty. The financial services industry should have been forced to write off the trillions of junk options and other junk paper that it has been generating for the last few decades.
Let the losses speak for themselves on the replacement of capitalism with casino corporatism for the American and Western economic model that Wall Street had engineered since deregulation.
Once Wall Street had to come clean on the trillions of losses it had incurred so as to maximize bonuses the Wall Streeters, the Fed would provide the equivalent in trillions in equity capital in losses that had just been generated.
This would lead to no inflation as there is no increase in the money supply. The trillions that the Fed provided would just be a replacement for the trillions that had been written off as losses.
The financial services industry would be full funded and strengthened as it would now be completely funded, have all the bad paper off its books, and be forced to be accountable to explain the trillions in losses the whiz kid and sharks of Wall Street had incurred upon their firms which lead Wall Street to act properly again.
Win Win Win. Except for the incompetent and amoral former elites and the wealthy and powerful power brokers that were formerly richly rewarded for playing with paper and swishing money around.
And the shareholders of the financial firms would be made poorer. But that is as it should be under capitalism. If you let incompetent people run unrestrained in running your companies, then you should suffer the consequences so as not to do so again.
This model would also solve the European debt crisis. For some reason short sighted policy makers want to solve a monetary problem with a fiscal solution. Even if their fiscal solutions will sink every economy in Europe.
Lastly about economic and monetary policy, why is raising interest rates considered to be the main policy option. Countless economic studies have shown a 1% increase in interest rates leads to an ¼ to 1/3 increase in inflation. Since capital is the most fundamental input in capitalism, making capital more expensive would make inflation worse not better.
Yet in spite of all the studies that say otherwise, our economic decision makers still spout the same line and use the same failed policies.
Lastly, the trauma of the civil war to be reinacted because of a 5% rate is ridiculous.
Of greater concern is that real inflation rate since the 1980s is much higher that officially reported due to changes in method used to calculate economic growth, employment, and inflation.
Using pre mid 1980s methods to calculate inflation whould show that the accumulated inflation rate since then to now thas been understated by 80%

How many more trillions of dollars will the fools in the US Congress squander on ill-considered military adventures in the greater Middle East, and on unnecessary weapons etc? And the value of the US dollar is driven down, down, down. I remember visiting Switzerland 40 years ago, when the Swiss franc was 20 cents American.

“And he pointed with alarm to Germany, where the mark had lost most of its international value.
By November 1923, the German currency was worthless, hauled about in wheelbarrows to buy groceries. The middle class had been destroyed…”
Pat, you’re neglecting the crushing blow of the Versailles reparations, (it was because of this victor’s justice that Keynes quit the British delegation to write The Economic Consequences); the supply shock to the German economy created by the French Army seizing the Ruhr Valley in 1922; and its backlash, a German general strike which cut economic output even more.http://www.historylearningsite.co.uk/hyperinflation_weimar_germany.htm

One common definition for inflation is too many dollars (or marks) chasing too few goods. German hyperinflation was induced, really, by all of the sudden there being too few goods. Since all US debts are in our own currency and our economic problem is inadequate demand for our aggregate supply of goods and services, the odds of hyperinflation here are as remote as the French Army seizing the Tennessee Valley.

That’s not to defend Bernanke and Geithner abusing the credit of the United States to bail out their banking buddies. Indeed, our clear and present danger is public corruption, not hyperinflation. To that end, I’d point out that honest Keynesians like Dean Baker and James K. Galbraith opposed both the TARP bailout in 2008 and the debt ceiling deal last month.

If salaries for the the lower 90% don’t rise soon or the jobs numbers don’t improve with good paying jobs where you can buy things our economy is doomed for all but the Rich but even they will get hit eventually.
Don’t tax the Rich are the Republicans insane they can well afford it, better than anyone we need revenue. Who are they representing? Where’s Obama and others Politicians when will they take on real issues. Not obscure ones. When will they finally stop rolling over and fight. When will the Middle Class come back or will it? If not we are a 3rd World country. Wheres Nader nice to hear his views on this?

Episodes of hyper-inflation occur when there are serious structural problems in an economy. I mean the real goods sector, not financial markets.

Mild inflation in the 4-6% annual range would actually be helpful towards repairing household balance sheets, which is the source of depressed consumer spending. It does punish savers, however. Or at least makes them get out of safe stuff like CDs and Treasury bonds and invest in stocks, corporate bonds, real estate, etc. in order to obtain a positive real yield.

Bernanke’s is not an ideal solution, but there is no political consensus for stoking aggregate demand with fiscal policy, which is the best way to get people back to work quickly.The Fed can do something about inflation if it get’s out of hand. Volcker did it in the early 1980s. For deflation, we have no policy tools.

My preference to Bernanke Monetary Policy (and probably Bernanke’s preference if the politicians will listen to him): I’d increase real bricks and mortar infrastructure spending and seriously increase our investments in basic science and pay for it by going back to Clinton-era taxes and putting a tariff on goods from cheap labor markets, but I don’t think that viewpoint is a political option today. We are going to preach and practice austerity and in a few years look back and wonder why it didn’t work.

Ben,Okla.City……………….Your Keynesian/socialist thesis has bankrupted America and will eventually make our “dollar'” worthless. After decades of money printing and planned inflation the plutocrats have the real wealth and the American citizens of all economic strata are left holding the debt bag. During Volker’s day the National Debt,if you include unfunded liabilities in the equation, was about 1/30 of today. The problem is that there is too much debt,both public and private,and not enough real savings for investment purposes. Unless the government welfare/warfare state is not just cut back but dismantled America is doomed to a 3rd world status. The answer is to do away with the Federal Reserve and its fiat money printing,repeal the legal tender laws,so that we can have honest money,abolish the Income Tax(which is used to pay the interest on the National Debt) and raise interest rate to encourage saving. As I stated above,the government must dismantle and privatize to balance its books. Without these actions America will crash over the economic cliff.

Ben…..Gold has been an anchor against run away government spending and inflation for over 5000 years. Paper money always fails. Whats so great about run away government spending and failure. And,what does the so called “greatest generation'” have to do with your Keynesian/Socialist thesis? My father fought in WW2 and couldn’t stand FDR. He called him a big phony, which of course FDR was.

I appreciate Ron Paul and Rick Perry for making noise about inflation and those who are trying to get the Fed to induce inflation. No, I don’t know what Rick Perry will turn out to be. But I don’t trust Bernanke.

First time I ever left the US I went to Canada. Their paper money is so different. Each denomination is a different color and size. Felt like I was spending Monopoly game money.

Today it feels the same here in America but for a different reason. I’ve got less control over things. Our local utility bills have gone up and all have added taxes. My county has raised property taxes & auto registration/tag fees. Even though gasoline prices go up and down a little diesel never seems to budge. Everything I buy is more expensive.

Last thing I want is for my government to tinker with my money and make it worth less.

Nothing is going to change unless we throw the money changers out of the temple. Take all the lobbyists and their campaign contributions and throw them out. Former Ohio Representative (and a damned good congressman in my opinion) James Trafficant went to Federal prison for accepting a briefcase full of cash some years back. These bums nowadays accept millions upon millions in campaign contributions and its legal. Until you change that we can talk until were blue in the face about auditing the Fed or ending the Wars abroad or putting tariffs on Chinese goods but nothing is going to happen as long as people become politicians in the hope that they can later become lobbyists for multinational corporations.